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The Business Journal is reporting that the FDIC has issued a C&D letter to San Rafael-based Tamalpais Bank. This is one of the first steps the FDIC takes generally as it chases the bank to either repair its capital base, sell itself, or get taken over.

The bank was a very active player in multi-family loans over the past few years. If memory serves correctly, they were one of the banks willing to do very low DSCR (debt coverage service ratio) loans, perhaps as even low at 80%.

The bank likely has some good assets on the book as it is a regional bank located right here in the SF Bay Area. I’m sure they’ll be getting some calls from investors seeking to “help” buy assets.

Comments

The current Financial Crisis is a result of simply too much liquidity in the economy. When “money” is available, banks will lend it, and when banks are lending, people will borrow. That’s how State-run capitalism works.

It’s confusing to blame it on “poor lending practices”, certain kinds of debt structure, “liar loans” etc. These are the effect, not the cause.

If the Drug Industry were de-regulated, we’d probably have Prozac in our breakfast cereal. Same for Financial Services!

Yes, Tamalpais was even more aggressive than the old Wamu Multifamily or UCB. The latter two would get comfortable with a break-even DCR on “market rent underwriting” but Tam was even more aggressive than that. Exceptionally aggressive at winning deals in the Bay Area and something had to give.

Thank goodness almost all small balance multifamily loans were written as hybrids (fixed to float) with the adjustable tail around 12MTA + 225bp. If those had been mostly written on five year balloons as with commercial, we’d be facing down the barrel of an even larger problem…. as it stands these loans are now adjusting to around 3.5% which ironically actually helps mitigate the cash flow problems that have been brought about with vacancy and declining rents in multifamily.